3231.T

• Overall Performance

  • Group recorded all-time record high revenue, operating profit, and net income for FY2026, the first year of the company's 3-year medium-term management plan, with performance well exceeding the 8% annual growth target set in the plan.
  • Despite recording a special loss related to the Hamamacho Building reconstruction, the firm still delivered significant net income growth, and achieved 5.4% ROA and 10.7% ROE, marking high asset and capital efficiency.
  • Strong domestic performance across most segments was led by residential condominium sales in the Residential segment and income-producing real estate sales in the Urban Development segment.

• Operational Progress

  • The expansion strategy for rental housing (including senior housing) and hotels outlined in the 3-year medium-term plan is progressing on schedule.
  • BLUE FRONT SHIBAURA is fully contracted and on track to begin full occupancy in the second half of 2026.
  • Sufficient medium-to-long term development land stock has been secured across core segments, supporting stable future operations.

• Shareholder Return

  • The company maintains a shareholder return policy targeting a total payout ratio of 40-50%, with a 4% DOE floor for dividends.
  • A 40 yen per share dividend was declared for FY2026, a 6 yen per share increase from the prior year. A 15th consecutive year of dividend increases is planned for FY2027, with a 4 yen per share increase to 44 yen per share.

• Management expects the overall domestic business environment to remain positive: both new and existing residential sales markets will stay strong, investment demand for income-producing real estate will remain robust, and rents are continuing to rise across most asset classes including offices.
• Group guidance for FY2027 (ending March 2027) targets 1.08 trillion yen in total revenue, 150 billion yen in operating profit, and 86 billion yen in net income, all of which would be new all-time records.
• The Residential segment is expected to deliver continued revenue and profit growth, with planned condominium sales of 350 billion yen (a 40 billion yen increase year-over-year) and 3,800 units sold (a 300 unit increase year-over-year; 60% of the annual sales target is already contracted as of the earnings call, with management confident of hitting the full year target amid favorable market conditions).
• The Urban Development segment expects flat income-producing property sales compared to FY2026, but forecasts lower profit due to expected rent declines at individual properties, resulting in overall higher revenue but lower profit.
• The Asset Management segment is expected to deliver continued revenue and profit growth driven by higher management fees from increased assets under management and higher fund property sale income.
• The Brokerage & CRE segment expects higher revenue but flat profit, as the firm plans to increase advertising and DX investment to support future growth.
• The Operations & Management segment expects higher revenue but lower profit, driven by increased DX-related expenses and personnel costs.
• The expected average annual operating profit growth over the first two years of the 3-year plan is 9.5%, which exceeds the 8.5% target, putting the full 3-year plan operating profit target of 160 billion yen on track to be achieved.

1. Residential Segment: Condominium for sale achieved 311.1 billion yen in revenue with a 26.6% gross profit margin. Sales of income-producing real estate (including senior housing and hotels) generated 13.4 billion yen in gross profit, a record high. This segment achieved overall revenue and profit growth driven by rising average condominium prices and increased income property sales. The segment holds approximately 2.5 trillion yen in land stock for condominium development (covering ~7 years of operations, with 60% located in Tokyo's 23 wards equivalent to 1.6 trillion yen in sales value), and holds 370 billion yen in development stock for senior housing and hotels including 140 billion yen in new development land acquired in FY2026.
2. Urban Development Segment: Sales of income-producing real estate (focused on offices and logistics) hit 218.3 billion yen in sales value with 60 billion yen in gross profit. The segment achieved overall revenue and profit growth driven by increased income property sales. It holds approximately 1.1 trillion yen in total investment including in-progress developments (covering 5-6 years of operations), with an average vacancy rate of 6.4% for held leased assets (excluding the fully contracted BLUE FRONT SHIBAURA which will reach full occupancy in H2 2026).
3. Overseas Segment: Declined in both revenue and profit due to fewer completed units in Vietnam and a delayed sale of a planned income-producing property.
4. Asset Management Segment: Achieved revenue and profit growth driven by steady growth in assets under management for private REITs and private funds.
5. Brokerage & CRE Segment: Achieved revenue and profit growth driven by increased transaction volume across retail, mid-market, and wholesale segments.
6. Operations & Management Segment: Achieved revenue and profit growth, driven by increased construction orders from tenant move-in work at BLUE FRONT SHIBAURA. Total group revenue for FY2026 was 942.5 billion yen, operating profit was 147.3 billion yen, and net income was 82.8 billion yen, with all three metrics hitting all-time records. Contribution percentage data per segment was not explicitly provided in the transcript.

• Overseas operations face ongoing uncertainty from geopolitical instability caused by Middle East tensions, which has disrupted broader economic and financial conditions. The company is adjusting property supply timelines in response, which will lead to lower profit in FY2027.
• Individual properties in the Urban Development segment's rental portfolio are expected to see rent declines in FY2027, putting downward pressure on segment profit.
• Planned increases in DX-related expenses and personnel costs across the Operations & Management and Brokerage & CRE segments will lead to lower or flat profit in FY2027, as the company prioritizes long-term growth over near-term earnings in these businesses.

No formal question and answer section was included in the provided transcript.